|Larry Madge, CEO, Sun Life Vietnam and Do Minh Toan, CEO and president of ACB, signed the agreement
Larry Madge, CEO of Sun Life Vietnam, is upbeat about the Vietnamese insurance market's bright prospects. He said that while the country's population is young with high GDP growth, only about 10 per cent of the population has insurance. The industry contributes only 1.5 per cent of GDP, which is low compared to neighbouring countries like Thailand, around 3 per cent of GDP. However, as the general income level increases, people become more interested in insurance and investment.
Furthermore, products and approaches are becoming more personalised than ever as the insurance industry innovates and introduces new technology. More distribution channels are engaged, such as the recent growth of bancassurance, which creates more comfortable access to insurance. All of these factors will contribute to the development of Vietnam's insurance market in the coming time, Larry Madge added.
Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's client base. In fact, as recently as 2015, bancassurance formed an immaterial portion of the total life insurance market in Vietnam. In a short period, bancassurance sales rose to achieve 13 per cent of the entire insurance market in 2017 before accelerating further to reach 22 per cent in 2018 and 29 per cent in 2019. Keeping in mind that the total market was also growing significantly simultaneously, this represents a compound annual growth rate (CAGR) of approximately 80 per cent for bancassurance sales over this period.
|Director Board of ACB and Sun Life Vietnam at the signing ceremony of the exclusive cooperation agreement on the distribution of life insurance products
Fast forward to the current environment, and almost all major banks in Vietnam now have exclusive partnerships with life insurance companies. Recognising these partnerships' importance, many monopoly deals have emerged, with FWD recently announcing a 15-year exclusive partnership with Vietcombank.
Generali – which penetrated Vietnam's market nearly a decade ago – inked an agreement with local lender OCB last year, whereby the bank will exclusively distribute Generali's insurance product in the country.
Canadian insurers Manulife and Sun Life are also active players in the bancassurance space. Manulife partnered with Saigon Commercial Bank (SCB) in 2015 and expanded to sign another agreement with Techcombank in 2017.
Sun Life signed an exclusive agreement with Tien Phong (TP) Bank at the end of 2019. Sun Life has recently formed a 15-year exclusive bancassurance partnership with Asia Commercial Joint Stock Bank (ACB). The bancassurance tie-up is estimated by Vietcombank Securities to be worth $370 million, one of the most remarkable monopoly deals in Vietnam's insurance market this year.
Launching on January 1, 2021, the partnership combines ACB's extensive distribution network of 371 branches with Sun Life Vietnam's competitive and comprehensive life insurance solutions. It will give ACB's fast-growing base of over 3.6 million clients access to an extensive range of innovative insurance solutions at different life stages.
The partnership significantly expands Sun Life's distribution capabilities, supporting its ambition to be a leader in Asia through distribution excellence in higher growth markets. Sun Life Vietnam achieved sales growth of 47 per cent over the 12 months ending September 30, compared to the same period last year, focusing on offering a comprehensive range of solutions and exceptional client experiences.
"We are pleased to enter into this partnership with ACB," said Dean Connor, president, and CEO of Sun Life. "Bancassurance remains a high-growth distribution channel in Vietnam. Sun Life is committed to the Vietnamese market, and this announcement is another example of Sun Life partnering to meet the evolving and changing needs of clients in this region."
"We are thrilled to announce this partnership to help millions of more clients in Vietnam achieve lifetime financial security and live healthier lives with Sun Life," said Léo Grépin, president of Sun Life Asia. "ACB is a market leader and shares our focus on delivering exceptional client experience, leveraging digital and analytics, and providing innovative solutions. We look forward to working with ACB to secure a brighter future for their clients in Vietnam."
On the same note, Tran Hung Huy, chairman of ACB, shared that, "ACB takes a long-term view in selecting our exclusive bancassurance partner and we are excited to start the 15-year journey with Sun Life to bring the full suite of financial services to our customers."
Meanwhile, Do Minh Toan, CEO and president of ACB, noted, "Sun Life, with its strong legacy in insurance business globally and a strong commitment to Vietnam, and ACB, with our execution excellence, will together build a leading bancassurance business in Vietnam."
The Vietnamese market offers significant growth potential for insurance due to low penetration rates and an emerging middle class. Consequently, the bancassurance business has been multiplying over the last several years and now contributes close to 30 per cent of total life insurance sales. The partnership between Sun Life and one of Vietnam's largest commercial banks is part of Sun Life's long-term strategy to grow its distribution capacity, supported by bancassurance.